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To: Art Bechhoefer who wrote (121063)	6/27/2002 5:26:36 PM
From: carranza2	Read Replies (1) \| Respond to of 152472

Art, allow me to be a devil's advocate here. I don't entirely buy Richebacher's stuff but I do find it useful to discuss subjects like it dispassionately. First, if I read KR correctly, he believes that the market will do poorly because of macroeconomic issues, not because the market is poorly regulated or because of other securities market-related matters--though the damage done by the current batch of crooks make Boesky and Milken look like cuddly Santa Claus elves. Secondly, the prediction that the dollar will fall precipitously is probably wrong because the underlying premise does not appear to be in place. It seems that a fall of the dollar to some extent is likely unless and until corporate profits go up. I see hopeful signs, such as today's revised GDP figures. If GDP keeps going up, and corporate profits therefore increase, the dollar should come out relativelty unscathed. If that should occur, the precipitous loss-of-foreign-investment catastrophe should turn out to be a minor twitch. Richebacher does seem to have a point on interest rates, though. How can Greenspan increase them to bolster the dollar without putting a needle to the inflated real estate bubble? Is he willing to let the air of another bubble after seeing the damage done by the disinflation of the tech bubble? Richebacher is of the opinion that the present national savings rate is a calamity because savings fund capital spending. The problem I have with this notion is that I don't know how the rate is calculated. My intuition tells me that savings made by workers in 401(k) plans are not counted, though they are substantial. Clearly, a lot of people are covered by 401(k) plans-- though mine looks more like a 201(k) plan--and I'm not entirely sure that they are counted in the national savings rate calculation. If they aren't, his claim that we save 0% of income seems to be in error. His other point, that corporate debt is excessive in view of weak profits, appears irrefutable. I like Q because it has no debt. Not the most important reason for my investment, but certainly a consideration.

To: Art Bechhoefer who wrote (121063)	6/27/2002 5:48:00 PM
From: carranza2	Read Replies (1) \| Respond to of 152472

Art, Researched the savings rate and 401(k) issue. It was surprisingly easy to determine that 401(k) money is counted towards the overall savings rate. Richebacher says that the savings rate is too low to allow for capital formation. However, look at this. The savings rate according to the spreadsheet was 2.8% when last measured in April. Not a great figure, mind you, but it is actually going up when compared to 2001. It is still nowhere near the 8% or so of the early '90s. bea.doc.gov Richebacher clearly has a point about savings rates but the trend appears not to be agreeing with him. Perhaps savings are being used to pay down consumer debt, which has skyrocketed? That would be a good thing, too.

To: Art Bechhoefer who wrote (121063)	6/27/2002 11:04:26 PM
From: Earlie	Read Replies (1) \| Respond to of 152472

Art: I respectfully disagree. Yes, there are many differences between the markets then and now, but the similarities are striking and should not be ignored. If you read the speeches and commentary available from the period (and I have), you come away from the experience with the view that while some didn't understand the impact of monetary and fiscal stimulation, the key guys did in spades. As just one simple example, think about the term "pushing on a string"' which was a common phrase of the period. That alone says much about both what was going on and why it didn't work. The fact is that the authorities fought the oncoming deflationary wave through credit expansion quite aggressively. Yes, some argued that it was "too little, too late", but that is easy to do in hindsight. The actual reductions in interest rates, when charted against the market/economic activity, sure don't look terribly out of whack, even today. Keynes wrote some good stuff and he also wrote some pure rubbish. Following generations tended to see his commentary on the period as definitive, when much of it was both shallow and inaccurate. The irony today is that our present Fed chief personally wrote some of the finest and most perceptive stuff ever penned about why the U.S. economy went off the rails. There can be simply no queston that HE KNOWS that much of what he has been doing over this last few years just shoves the economy ever closer to the black hole. Personally, I think he gave it one last (albeit weak-kneed) shot at getting folks to wise up, with his "irrational exuberance" comment way back when. When he was pistol-whipped by the journalists , the politicians and the public, he just didn't have the gonads to stand up to the pressure (and very few could) and rolled over. Once passed that point, I suspect he determined to fight the best rearguard action possible, knowing fully however that he was moving the country inexorably closer to the pit's edge. The only surprise to me is that he hasn't taken retirement, but I suppose that absolute power does indeed corrupt absolutely. Best, Earlie